Sub-Saharan Africa’s economic growth is expected to improve to an average of 4.2 per cent this year, up from an estimated 3.8 per cent in 2024, driven by investments in energy and infrastructure and an expanding services sector, financial rating agency Moody’s Ratings said, quoted by news portal Engineering News.
The agency raised its outlook for the region’s credit fundamentals from ‘negative’ to ‘stable’, stating that fiscal consolidation efforts would help reduce debt, even despite the persistence of social, political and environmental risks in countries such as Côte d’Ivoire and Mozambique.
The country is one of the most affected by environmental risks in the region, and faces added challenges due to the frequency of cyclones and prolonged drought, which jeopardise agricultural production and energy supplies. Mozambique has also been dealing with political instability, intensified by post-election protests led by opposition leader Venâncio Mondlane.
Moody’s said in a report dated 8 January that South Africa and Nigeria, the region’s two largest economies, are carrying out reforms that increase their creditworthiness and prospects for economic growth.
The agency explains that South Africa will take some time to see significant improvements, even if the power cuts subside, while Nigeria must continue its efforts to establish a better functioning foreign exchange market.
Heavy rains as an effect of climate change
‘Average economic growth in sub-Saharan Africa is expected to be higher than in the past decade, partly due to a series of shocks, including the fall in commodity prices in 2014-2016, the covid-19 pandemic and rising inflation following Russia’s invasion of Ukraine in 2022,’ Moody’s pointed out.
However, the agency said, a further loss of access to global capital markets, increased refinancing risks and as yet unknown inflationary pressures would threaten stability. ‘A sustained appreciation of the dollar in 2025 could increase the cost of servicing foreign currency debt,’ it added.
Moody’s expects Foreign Direct Investment flows to remain strong in countries that produce the raw materials needed to combat climate change, such as the Democratic Republic of Congo. Economic growth in Angola and the Republic of Congo is expected to strengthen in 2025 due to new oil and gas projects, offsetting declining yields from ageing fields.
‘Not all sub-Saharan countries are expected to experience stronger economic growth due to population growth – a long-standing challenge in Africa. The continent is also susceptible to environmental risks, such as a severe drought in Zambia that has disrupted hydroelectric and mining energy production in the country, cancelling out the benefits of high copper prices,’ the agency explained.
